Lenders to withdraw debt recast if Future Group-RIL deal goes through

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New Delhi: Lenders to Kishore Biyani’s Future Group will withdraw the just-approved debt recast plan that offered easier repayment options, if the troubled retailer’s Rs 24,713 crore asset sale to Reliance Industries Ltd (RIL) goes through in a reasonable time frame, sources said.

Lenders of Future Retail last week agreed to extend repayment of loans by up to two years, while converting unpaid interest into a funded interest term loan. The penal charges too will be waived under the recast plan.

The recast plan has been approved by a RBI-constituted expert committee headed by K V Kamath.

Banking sources said the debt recast is actually ‘Plan B’ to help the nation’s largest retailer stay afloat. The recast will kick in only if the deal to sell Future’s retail, wholesales, warehousing and logistics assets to Reliance Retail Ventures Ltd (RRVL) does not go through.

If the Reliance deal goes through, the recast plan will be withdrawn. Lenders, they said, are still banking on ‘Plan A’ which is asset sale to RIL.

So far, the consortium of lenders has approved the debt restructuring of Future Retail Ltd (FRL), Future Enterprises ltd (FEL) and Future Supply Chain Solutions Ltd. The restructuring plans of FEL and FRL have received approval from the RBI-constituted expert panel, sources said.

The Future-RIL saga

The Rs 24,713 crore deal between RIL and Future Group was announced in August last year but it is getting delayed as e-Commerce major Amazon is contesting it at several forums, including an arbitration at SIAC and before the Supreme Court, which on Monday stayed the ongoing proceedings before the Delhi High Court.

Citing delay, RRVL has also extended the timeline for the deal to be completed by six months to September 30, 2021. According to industry sources, debt resolution plans for two more Kishore Biyani-led Future Group companies — Future Consumers and Future Lifestyle — are also expected to be cleared by the consortium of lenders.

The Expert Committee under the chairmanship of veteran banker K V Kamath has approved the debt resolution plans of FEL and FRL as permitted under the Reserve Bank of India”s resolution Framework for COVID 19-related stress, said the source.

The RBI has set up a five-member expert committee under Kamath to suggest financial parameters for resolution of coronavirus-related stressed assets and all debt having aggregate exposure of Rs 1,500 crore or above have to be validated by it.

The lenders and the board of both Future Group companies have already approved the respective restructuring plans. Now the companies and the lenders would have to complete other formalities and submit it finally before the RBI, the source added.

Earlier this week, lenders of Future Supply Chain Solutions Ltd also approved the debt restructuring plan of the company, but as its total debt was below Rs 1,500 crore, it does not require approval from the Kamath panel.

Future Supply Chain Solutions Ltd is the group’s logistics company. It provides warehousing, distribution and other logistics solutions.

Debt burden

A reply from Future Group regarding the development could not be ascertained by the time of filing of the story. FRL, which operates retail chain stores under several formats including Big Bazaar, fbb, HyperCity etc, has a consortium of 28 lenders and FEL has 19 lenders.

Though both the companies have not specified their total debt under the restructuring in their regulatory filing but according to reports from Care Ratings, FRL has a loan of Rs 6,278 crore as of October 2020, and FEL has a loan of Rs 1,777 crore as of December 2020.

FEL’s loan includes long-term term loans of Rs 528 crore, long-term fund-based bank facilities of Rs 3,250 crore, and short-term non-fund based bank facilities of Rs 2,500 crore.

While FRL debt includes long-term term loans of Rs 528 crore, long-term fund-based bank facilities of Rs 3,250 crore, and short-term non-fund based bank facilities of Rs 2,500 crore.

The restructure would cover FRL’s working capital demand loans, term loans, cash credit, short term loans, Non-Convertible Debentures (NCDs), purchase bill discounting limits, other working capital loans and unpaid interest, which became overdue, it added.

The e-Commerce major Amazon, which had invested in Future Coupons in August 2019, with an option of buying into the flagship Future Retail after a period of three to 10 years, is opposing the deal, claiming the first right.

On October 25, 2020, an interim order was passed in favour of Amazon with a single-judge bench of V K Rajah barring Future Retail from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.

The Supreme Court on Monday stayed the ongoing proceedings before the Delhi High Court in the case related to the amalgamation of FRL with Reliance Retail.